Promising signs of easing pain among services firms

Signs of easing pain among services firms during March today offered
some hope that the UK economy is over the worst of the slump.

The Chartered Institute of Purchasing and Supply's activity index gave
its highest reading for six months at 45.5, while business confidence
is at its strongest since August.

A score below 50 still shows industry contraction, but the slight improvement signals the rapid pace of the decline is easing.

The figures follow healthier survey readings from the construction and manufacturing sectors over the month.

Ray of light: Business confidence
is at its strongest since August

Capital Economics' Vicky Redwood said: 'The good news is that
the sharpest contractions in output may be behind us. The bad news is
that we are still a long way from the economy actually expanding
again.'

Despite the tentative signs of optimism, CIPS' director of
professional practice Roy Ayliffe said services firms were 'straining
every muscle to survive the testing environment'.

This was caused by the weaker pound raising the price of imports, as well as fuel and food costs edging higher.

Many players also think the downturn will ease competitive
pressures in a year's time as rivals fall by the wayside and
opportunities for acquisitions emerge.

But other experts warned that steadily rising unemployment posed a risk to the sector through lower spending levels.

ING Bank's James Knightley said: 'There are still ongoing downside risks to activity.

'With the employment component hitting new all time lows the
outlook for consumption remains very poor and as this makes up
two-thirds of all spending in the economy we continue to look for
negative GDP growth right through 2009.'